Sudhakar Gande is in the hot seat at Global Trust Bank. As managing director of the bank for the past 28 months, he has pursued the twin agendas of cleaning the bank's books and bringing in a strategic investor.
Global Trust, which was promoted by Ramesh Gelli, has been caught in a quagmire of controversies starting from its unhealthy exposure to capital market loans and rumours of insider trading against Gelli in collusion with Ketan Parekh.
Gande was brought in to take over operations at the Hyderabad-based bank in 2002, a year after Gelli was ousted by the Reserve Bank of India.
His brief to bring in a strategic investor almost bore fruit when after a year of wooing, a quality investor like New Bridge Capital agreed to infuse close to $200 million into the loss-making bank.
But the proposal from New Bridge remained just that -- a proposal -- when the RBI decided to announce a moratorium on the bank's operations and then, two days later, announced that Oriental Bank of Commerce would take over Global Trust.
The proposal submitted to the RBI would have been a landmark deal in the banking industry and have been the first case of a loss-making bank scripting a successful turnaround story on its own.
Apparently, the RBI was not willing to accept certain conditions that were put forth in the proposal.
Two conditions that the RBI was uncomfortable with was the deferring of provisioning of about Rs 400 crore (Rs 4 billion) in bad debts over a three-year period. This apart, the New Bridge proposal had indicated that in case of a dispute, the arbitration would happen in Wales, UK.
Business Standard spoke with Gande on his views about the bank controversies and the recent decision of the RBI. Excerpts:
What went wrong with Global Trust Bank?
GTB's main problem was its exposure to the capital markets. Consequent to over-exposure to the capital markets in 2001, non-performing assets [NPAs] was one of the factors that worked against us.
It was fundamentally a problem of quality of the historical asset book that we were carrying while all the other functions of the bank were doing fairly well.
Given the circumstances under which we were operating, I think we have done reasonably well. We met the challenges, we made the best efforts to ensure that the franchise value remained intact and created a platform for capital infusion.
Are you happy with the RBI-initiated action of Global Trust being taken over by Oriental Bank of Commerce?
I am happy with the initiatives taken by the RBI, which I think are the best in the given circumstances. Moreover, there are a lot of synergies with the bank that is taking us over.
Oriental Bank of Commerce is strong in the north while Global Trust is dominant in the south. There is immediate synergy in this amalgamation scheme.
Do you think this scheme of amalgamation amounts to nationalisation through the back door?
No, I don't think so. This is the best that could have happened to Global Trust, given the circumstances and the environment.
When did you join the bank? What has changed at Global Trust, before and after you came?
When I joined the bank two years and four months ago, it was already in an extremely difficult situation on account of the quality of the asset book, employee morale, image in the market place and so on. I set out specific tasks when I took over the assignment.
My priority focus areas were recovery of NPAs and critical accounts, managing and retaining franchise value, managing the liquidity, keeping up employee morale and also ensuring the creation of a platform for capital infusion into the bank.
How successful were you in achieving the tasks you set for yourself?
I am satisfied with the progress we have made. We have recovered over Rs 700 crore (Rs 7 billion) and obtained additional collaterals of Rs 300 crore (Rs 3 billion) toward NPAs. We have also put in place strong internal systems and procedures, particularly relating to credit.
This has ensured that NPAs on the new disbursement done during the past two years is about 1 per cent, which is comparable with the best in the industry.
We managed liquidity and staff morale well during the past two years. During this period, we also worked closely with the regulators on various issues including reduction of risk-weighted assets, which improved our liquidity and also helped us in managing it better.
What were your efforts on the capital-infusion front?
We worked hard for over one year and submitted a proposal for infusion of capital of over Rs 1,500 crore (Rs 15 billion) by New Bridge Capital, USA, which is a well-known private equity fund. New Bridge has had previous experience in turning around banks worldwide.
They had asked for certain regulatory forbearances, which were not acceptable to the regulators and, thus, the deal did not go through.
Despite the rejection of this proposal by the RBI, as a professional it gives me immense satisfaction that my team and I created a platform that inspired the confidence and financial commitment from an institution such as New Bridge.
Do you think that the amalgamation could have been announced earlier, before or alongside the moratorium? That way, lakhs of depositors need not have spent sleepless nights. They need not have been inconvenienced if the RBI had spelt this out a lot earlier.
The RBI has to take into account various factors including protecting depositors' interest, stabilising payment systems and financial systems and so on before deciding the course of action.
I am sure that under the given circumstances, this was the best possible solution and I am not in disagreement with them at all.
What does the future hold for you? You were on contract with Global Trust.
I have another nine months to go before my contract expires. My primary task was to turn around the bank and create a platform for capital infusion. I have succeeded in this.
My task now is to work along with the RBI and Oriental Bank to ensure that the amalgamation process happens smoothly and swiftly.
There are differences between PricewaterhouseCoopers' audited accounts and the RBI's inspection numbers. What is your view on this?
There are always differences in inspection reports. However, in this case the variations are on the higher side.
PwC is a well-known international auditing firm and the issue is before the regulator. I am fairly certain that a solution will be found out soon.
There is a perception that you and Ramesh Gelli share a close relationship?
This is totally untrue.